Red flags specific to accountants

In addition to other red flags, we have identified the following specific red flags relevant to our business and industry:

• Client has cheques inconsistent with sales (i.e., unusual payments from unlikely sources).
• Client has a history of changing bookkeepers or accountants yearly.
• Client is uncertain about location of company records.
• Company carries non-existent or satisfied debt that is continually shown as current on financial statements.
• Company has no employees, which is unusual for the type of business.
• Company is paying unusual consultant fees to offshore companies.
• Company records consistently reflect sales at less than cost, thus putting the company into a loss position, but the company continues without reasonable explanation of the continued loss.
• Company shareholder loans are not consistent with business activity.
• Examination of source documents shows misstatements of business activity that cannot be readily traced through the company books.
• Company makes large payments to subsidiaries or similarly controlled companies that are not within the normal course of business.
• Company acquires large personal and consumer assets (i.e., boats, luxury automobiles, personal residences and cottages) when this type of transaction is inconsistent with the ordinary business practice of the client or the practice of that particular industry.
• Company is invoiced by organisations located in a country that does not have adequate money laundering laws and is known as a highly secretive banking and corporate tax haven.